Buying a home comes with more than just a down payment. There are lender fees, title costs, prepaid expenses, taxes, insurance, and other costs that show up before you get the keys.
So, when tax season rolls around, it’s natural to wonder: Are closing costs tax deductible?
The short answer is that most closing costs are not tax deductible, but a few expenses connected with buying and financing your home may qualify if you itemize your deductions.
And for 2026, some important tax changes could affect homeowners, including the return of the mortgage insurance deduction and a much higher limit on state and local tax deductions.
Please Note: Ideal Lending is not a tax advisor. This information is provided for general educational purposes only and should not be considered tax or financial advice. Always consult a licensed tax professional about your individual situation.
What Changed for Homeowners in 2026?
The One Big Beautiful Bill Act, signed into law in 2025, made several changes that affect homeowner deductions.
Here are a few worth knowing:
- The $750,000 mortgage interest deduction limit was made permanent.
- Qualifying mortgage insurance premiums can once again be deductible beginning with the 2026 tax year.
- The state and local tax (SALT) deduction limit increased significantly. For 2026, the limit is $40,400 for most filers, although income limits and other rules apply.
- The standard deduction increased again for 2026, which can affect whether itemizing your deductions makes sense.
None of this automatically means you’ll get a bigger tax deduction because you bought a home. But it does make it worth taking a fresh look at the numbers.
Understanding Closing Costs
Closing costs are the fees and expenses associated with completing a real estate transaction.
Whether you’re buying your first home or purchasing another property, understanding your closing costs ahead of time can help you avoid surprises.
Depending on the transaction, closing costs may include:
- Lender fees
- Title services
- Appraisal fees
- Recording fees
- Prepaid property taxes
- Homeowners insurance
- Mortgage interest
- Discount points
- Mortgage insurance
- Other third-party costs
Closing costs vary based on the property, loan program, location, purchase price, and other factors. Some of those costs may offer a tax benefit. Most won’t.
If you’re buying in Florida, our Florida Closing Cost Calculator can help you estimate what you may need to bring to the closing table.
What Closing Costs May Be Tax Deductible?
There are a few expenses connected with buying a home that may qualify for a federal tax deduction.
Mortgage Interest
Mortgage interest is one of the most common homeowner deductions.
For qualifying mortgages taken out after December 15, 2017, homeowners may generally deduct interest paid on up to $750,000 of qualifying mortgage debt, subject to IRS requirements.
The 2025 tax law made that $750,000 limit permanent.
Keep in mind that mortgage interest is generally an itemized deduction, so having deductible interest doesn’t necessarily mean itemizing will save you more than taking the standard deduction.
Discount Points
Discount points are essentially prepaid interest. You pay more upfront to reduce the interest rate on your mortgage.
Qualifying points paid when purchasing a primary residence may be deductible in the year they’re paid. In other situations, including many refinances, the deduction may need to be spread over the life of the loan.
One important distinction: not every lender fee is a deductible point.
Processing fees, underwriting fees, appraisal fees, and other charges for services generally don’t become deductible simply because they’re included in your closing costs.
Mortgage Insurance Premiums
Here’s one of the more notable changes for 2026.
Qualifying mortgage insurance premiums can once again be treated as deductible mortgage interest beginning with the 2026 tax year.
That may include qualifying private mortgage insurance (PMI) and FHA mortgage insurance premiums (MIP).
Income limits and other eligibility rules apply, so this is one you’ll want to confirm with your tax professional.
Property Taxes Paid at Closing
Some qualifying property taxes may also be deductible.
For example, if you’re responsible for a portion of the year’s property taxes as part of your closing, that amount may qualify as an itemized deduction.
However, money simply placed into an escrow account for future property taxes isn’t automatically deductible when you deposit it.
Property taxes also fall under the state and local tax, or SALT, deduction.
For 2026, the SALT deduction is generally limited to $40,400 for most taxpayers. That limit includes qualifying state and local income or sales taxes along with property taxes, so the entire $40,400 isn’t necessarily available for property taxes alone.
2025 and 2026 Standard Deduction Amounts
Why does the standard deduction matter?
Because deductible home expenses generally help you only if your total itemized deductions make itemizing worthwhile compared with taking the standard deduction.
| Filing Status | 2025 | 2026 |
|---|---|---|
| Single / Married Filing Separately | $15,750 | $16,100 |
| Married Filing Jointly | $31,500 | $32,200 |
| Head of Household | $23,625 | $24,150 |
For some homeowners, mortgage interest, property taxes, qualifying mortgage insurance, charitable contributions, and other allowable deductions may add up to more than the standard deduction.
For others, the standard deduction will still be the better option.
That’s why it’s important to look at your entire tax picture rather than one closing cost by itself.
What Closing Costs Are Not Tax Deductible
Most of what you pay at closing doesn’t qualify for an immediate federal income tax deduction.
Common examples include:
Home Inspection Fees
The cost of having the home’s condition professionally inspected is generally not deductible.
Appraisal Fees
An appraisal required as part of getting your mortgage is generally not deductible on a primary residence.
Credit Report Fees
Fees associated with obtaining your credit report as part of the mortgage process generally aren’t deductible.
Loan Application and Underwriting Fees
Application, processing, and underwriting fees charged by the lender generally don’t qualify as deductible mortgage interest.
Document Preparation Fees
Charges for preparing loan documents and other mortgage paperwork generally aren’t deductible.
Title Insurance
Title insurance generally isn’t deductible when you purchase a home.
However, some title-related costs may become part of your home’s tax basis, which could matter when you eventually sell the property.
Transfer Taxes
Transfer taxes generally aren’t deductible as property taxes. Some may instead be included in your property’s cost basis.
Keep Your Closing Documents
Even if a closing cost isn’t deductible now, it may still matter later. Certain expenses can affect your cost basis, which may be important when you eventually sell the home.
Keep copies of your:
- Closing Disclosure
- Settlement statement
- Form 1098
- Property tax records
- Records of major home improvements
Some of those documents can be useful at tax time, and others may become important years from now when you sell your home.
Frequently Asked Questions
Can you claim closing costs on your taxes?
Most closing costs can’t be claimed as a federal income tax deduction. However, qualifying mortgage interest, certain discount points, property taxes, and mortgage insurance premiums may be deductible if you meet IRS requirements and itemize.
Are closing costs tax deductible for first-time homebuyers?
There isn’t a separate federal closing-cost deduction just for first-time homebuyers. First-time and repeat buyers generally follow the same rules for mortgage interest, points, property taxes, and other deductions.
Is PMI tax deductible in 2026?
Qualifying mortgage insurance premiums, including certain PMI premiums, may once again be deductible beginning with the 2026 tax year. Income limits and other IRS requirements apply.
Are property taxes paid at closing deductible?
They may be. Qualifying real estate taxes allocated to the period you own the property can potentially be deductible. Money placed into escrow for future taxes generally isn’t deductible until those taxes are actually paid.
How do I know if itemizing is worth it?
Compare your total allowable itemized deductions with the standard deduction available for your filing status.
That means looking at the whole picture, not just your closing costs. A tax professional can help you compare the two options and determine which applies to your situation.
Planning to Buy a Home?
Understanding what you’ll need at closing is a lot easier when you know the numbers ahead of time.
If you’re buying in Florida, use our Florida Closing Cost Calculator to get an estimate of your potential closing costs.
And if you’re ready to take the next step, getting pre-approved for a mortgage can help you understand your financing options, estimated payment, and how much cash you may need before you start shopping.
*Ideal Lending is not a tax or financial adviser. Please consult a licensed tax adviser and appropriate government agencies regarding any potential effect on taxes or government benefits.
